There is perhaps no better feeling than hopping into your car on a Friday afternoon in the summer with the knowledge that your empty beach house is a few hours away. However, for most this is fantasy, not reality.

Even though prices have been dropping for about a year in beach communities close to DC, buying a vacation home is still an undertaking that requires a large chunk of money and a good deal of thought and research.

Before even starting the search process, a prospective buyer should confirm with a financial professional that they are in a position to afford a second home. Most people are not in a situation where they can start paying off a second mortgage while they are still paying off that of their first home. As we noted earlier in the week, the annual payments for a beach home just under $1 million can be upwards of $60,000.

“Preparation is crucial when buying a second home, and re-arranging your finances before you even start looking is a very good idea,” Kim Hook of Bethany Beach’s Remax By The Sea told UrbanTurf. “A lot of people put the cart before the horse, so to speak, and start looking before making sure that they can buy. That is not a good idea.”

Prospective buyers should not only calculate what they can afford in terms of a down payment, but also take into account what they will need to spend on furnishings, general maintenance and insurance. Since Hurricane Katrina, insurance payments have skyrocketed in areas close to the ocean.

“Some insurance companies have pulled out of our area completely,” Hook said of the area around Bethany, Dewey and Rehoboth. “State Farm won’t touch anything east of Route 1 [oceanfront]. And in the past, you paid about $2,000 a year for a big home. Now people are paying double that for insurance.”

The good news is that the increase in insurance premiums is offset by dropping home prices. Hook notes that there is a lot of inventory on the market these days, and the prices are not nearly as high as they once were.

“When the market was hot, people were buying anything,” she said. “A ‘tear down’ house (shack) could go for $1 million and the owners would just tear it down and use the land to start over. These days, that is not happening.”

While the prices may be low, unless you are in a position where you can have the house to yourself all year round, you will need to rent it out for a good portion of the summer. This also requires money. Heather Allen of Kitty Hawk Rentals in the Outer Banks explains.

“It is possible to rent your home yourself but the majority of the properties in this area use a management company,” Allen told UrbanTurf. “That way the owner does not have to deal with the hassle of cleaning and maintaining the home after each set of guests.”

If you do decide to save some money by renting the home yourself, keep in mind that it is not realistic to think that the money you make renting during the summer months will come close to paying your mortgage.

Allen, who has been in the Outer Banks market for ten years, noted that a four-bedroom, two-bath in Kitty Hawk rents for $1,495 a week in the peak summer months. The monthly mortgage on a similar property would be almost triple that.

“At one time, it was a very real possibility to think that you could pay off your mortgage with the money you made from rent,” Allen said. “However, beach properties in the Outer Banks have appreciated so much that this is just no longer possible.”

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